Ford just announced its electric vehicles development strategy in China, planning to shift about 70% of its electric cars to China by 2025.

It’s reported that Tesla registered 1 billion dollars of sales in China in 2016, and that for the global market was 7 billion. Its CEO said that China will enjoy the biggest market share in the following years.

The CEO of VW said recently that the newly designed ID electric vehicles are meant for the Chinese market. And it’s expected that by 2025, there will be 1 million cars sold.

Meanwhile, EVs such as electric buses and trucks produced by Chinese car manufacturers are seen in the US market.

By now, you may ask, why the electric vehicle industry among all the other industries in China, and why would China be the go-to option for the world? Keep reading and you’ll see.

1. What is happening in the EV industry in China now?

Over the past decade, the Chinese government has been issuing many policies and regulations to drive the growth of the electric vehicle market in China.

According to the latest data, such actions are proven to be quite effective. The International Energy Agency said that Chinese consumers have bought over half of the electric vehicles produced on earth.

The fast development of the EV industry and the market make China too big to be neglect, which is why so many international EV giants are planning to gain their share of the market in the following years.

1.1 China’s EV industry sees a rapid development and huge potential

China is both the biggest car manufacturer and it has a vehicle market that is bigger than that of any others.

After 20 years of rapid development, the total number of cars sold in China in 2018 registered a number at 227 million, which was down by 6% compared with that of last year.

One thing worthy of notice is the sales number of electric vehicles. The total sales number of new energy vehicles (NEVs), hybrid electric vehicles included, saw a huge increase in 2018.

Albeit a promising sign for the EV industry, only 0.6 million NEVs were sold in the first 3 quarters of 2018, according to the CAAM. This number only occupies a small portion of the vehicle market in China.

From another perspective, this shows how much potential China has in the EV field.

1.2 China is growing into a leader in the electric vehicle industry

Even though the number of EVs sold only occupies a small portion of the overall vehicle market, China still has the biggest electric vehicle market share in the world, with the total sales volume of EVs surpassing that of Europe and the US combined.

To be more exact, the local EV brands such as BYD or Beijing Automobile occupied 94% of the market share, making it quite a big problem for the international companies to catch up. Even though these two names may sound alien for people outside of China.

This situation should attribute to the government subsidiaries to EV and its traffic restrictions to fuel vehicles.

1.3 The new government policies

Speaking of, the Chinese government just released an update to the subsidiary policy to EV. The update aims at encouraging the development of more advanced EV with longer mileages, lower electricity usage, and higher energy density. In the long run, such an update will help the Chinese EV market to grow into a healthy and sustainable one. But on the way to the more advanced EVs, there are bound to be some growing pains.

Apart from the updated subsidiary policy, there will be a new quota and credit system for the EV manufacturers. To make it easier to understand, it’s a system where car manufacturers can only produce a certain amount of EVs once they have enough credit scores. The credit scores will be decided by how far the car can go with a fully-charged battery, i.e. how effective their EVs are.

Manufacturers that fail to abide the rules will be fined, but they can choose to purchase credit scores from manufacturers that have surplus credit points.

In other words, the credit system could be more attractive for international companies like Tesla, who is known for effective EVs. Because they will most likely to have the highest credit points, and they can sell the points to companies who are in need.

1.4 The growing pains

For China, at least in the short term, the above policies are bound to bring out challenges for the EV industry.

Some worried that cutting back on the government subsidiaries could be a shock to Chinese car manufacturer on the stock market. Some said that lacking sufficient infrastructure for EVs could cast a shadow to the sales of NEVs. Not to mention the possible changes brought by the trade war between China and the US.

However, this is more like that the Chinese government’s attempt to transfer the subsidiaries for NEVs from the government to car manufacturers. We shall wait and see how the end result would be.

2. The international EV giants’ eyes are on China

It’s estimated by Routers that in the next 5 to 10 years, the global car manufacturers plan to invest 300 billion dollars to the EV industry, and 45% of the total amount, i.e. about 135 billion dollars, will target at China.

VW (Volkswagen) accounts for almost 1/3 of the total 300 billion dollars of investment, which is about 91 billion dollars, making it stand out from the crowd. It plans to increase its EV production capacity to up to 150 million cars, and will roll out the electric cars for 12 of its brands, Audio and Porsche are included.

VW is not the only giant that has so much faith in the EV industry. Daimler AG, Nissan, Toyota, BMW, GM and Volvo also have plans to invest heavily in this field. Among them, GM plans to have 10 NEVs off the production lines by 2020 and plans to double the number in 3 years.

With these giants and their cross-border partners expanding their territory in China, and purchasing batteries from local suppliers, it won’t be too long before they can catch up with some of the major car manufacturers in China in terms of expenditure.

3. China stands ready to embrace the opportunities

With the future huge amount of investment pouring to China, the Chinese government stands ready to face the opportunities and challenges that come along.

Over the past decades, China has been working hard to catch up with the international car engines leaders, i.e. the German, Japan and the US. But nowadays, China is among one of the leaders in the research and development of electric vehicles.

The CEO of VW once said that China will be deciding the future of VW. He added that China will become one of the leaders in the vehicle field, and that China is at the best time to develop the next generation of cars with the fully packed skill sets, which are only partly equipped in Europe or other regions.

4. The lithium battery supply chain

4.1 Reconstructing the supply chain for EVs

As professional and sophisticated as Toyota, it plans to take the less beaten track of not working with joint ventures for off-the-shelf NEVs. Toyota has always been discreet, and it takes time to construct a supply chain for EV, given that it has a rather long developing cycle.

This is a glimpse of how the vehicle industry works: the core components and parts are mainly bought from giants such as BOSCH, Aisin Seiki, and ZF Friedrichshafen. But the situation is about to change.

With the era of NEVs coming along, the supply chain system for the whole vehicle needs to be reconstructed.

Unlike Toyota, BMW and VW made bold moves. Key components suppliers such as CATL are on their vendor list, and they founded new energy investment companies together with whole car manufacturers as a way to speed up the R&D for the NEVs.

4.2 Chins still has a long way to go

Tesla chose to build its mega lithium battery factory in Shanghai. Chinese lithium battery giants such as BYD and ATL are also building their mega-factories, and more and more Japanese and South Korean manufacturers are trying to follow suit.

Even so, there is still a long way to go for Chinese manufacturers to fully catch up with the international giants.

To be more exact, it’s widely accepted that Chinese manufacturers can make lithium batteries that are excellent in terms of energy density, life cycle, production and quality control etc. But there is yet to be a company that can excel in all these aspects combined.

Moreover, Chinese manufacturers still need to catch up with their foreign counterparts on the expertise, techniques and experience fronts. Without much investment in these aspects, the actual production could suffer, especially when it comes to mass production.

In all, challenges and opportunities always come hand in hand, and the EV industry in China is no exception. China has the potential and strong support to be the most advanced EV manufacturer and market, and all there’s left for you to do is to decide whether to go for it or not.

Feel free to let me know your thoughts by leaving a comment. I’ll be in touch as quickly as possible.